By Dr. Chang H. Kim, Dr. Peng Liu and Dr. Lei Liang
In today’s dynamic business environment, characterised by volatility, uncertainty, complexity, and ambiguity (VUCA), organisations face unprecedented challenges in achieving sustainable growth. To thrive in this dynamic environment, companies must adopt innovative management strategies informed by comprehensive internal and external environmental analyses. HeXie Management Theory (HXMT) emerges as a practical approach, offering a holistic framework to effectively address VUCA challenges. This paper delves into the principles of HXMT and explores its practical application within organisational settings.
Volatility, Uncertainty, Complexity, and Ambiguity (VUCA) Remain a Pressing Reality
We are still living in times of volatility, uncertainty, complexity, and ambiguity (VUCA) (Martinez-Moran & Dolan, 2024). These factors are inescapable realities for business leaders. Consequently, the contemporary business landscape demands a systematic analysis of the management environment and the formulation of effective response strategies. It is important to note that most corporate crises are not only predictable but also usually self-inflicted (Barnett, 2020). To thrive in a VUCA world, therefore, leaders need new, much more integrated, interdependent models for strategy, leadership, and management. These models must be grounded in scientific principles to address the challenges of this complex environment (Millar et al., 2018).
Haier’s “Rendanheyi”: Thriving in a VUCA World
In the context of the VUCA world, it is worth examining how China’s Haier Group, the world’s largest appliance manufacturer, fostered management innovation. Haier’s founder, Zhang Ruimin, is widely credited with creating a ground-breaking business model that seamlessly blends the essence of traditional Chinese culture with modern Western business practices. Under his leadership, Haier developed “Rendanheyi (人单合一)” in 2005. This concept can be loosely translated as “integration of people and goals” or “the win-win model of individual-goal combination.” Rendanheyi is not a single practice, but rather a platform comprised of various management practices. Through this platform, Zhang transformed Haier from a traditional, hierarchical manufacturer into an entrepreneurial and agile firm that responds quickly to market changes (Millar et al., 2018; Fisk, 2016).
The development of Rendanheyi at Haier was significantly influenced by both internal and external factors. Internally, elements like organisational structure, leadership style, and available resources played a role. Externally, the environmental context including competitive, technological, and institutional aspects also contributed. The Haier’s management model thus provides a valuable lesson: before introducing any new management innovation, managers must carefully consider the realities they face both internally and externally.
HeXie Management Theory: A Practical Approach to VUCA Challenges
Building on management innovation cases like Haier’s Rendanheyi, a robust theoretical framework exists to guide such endeavours: HeXie Management Theory (HXMT). HXMT provides “a pragmatic approach and toolkits to cope with a fast-changing and uncertain environment by integrating traditional Chinese philosophical intelligence and modern management science knowledge and techniques on problem solving” (Xi et al., 2010, p. 209). Developed by Professor Xi Youmin in 1989, HeXie Management Theory (HeXie [həˈʃieː], meaning “harmony” in Chinese) is first an emerging theory rooted in Chinese management practices (Cao et al., 2011). It emphasises achieving organisational harmony through dual mechanisms: optimised design and employee motivation. These mechanisms empower employees to contribute significantly to the organisation’s success. As a practice-based management theory, HXMT has benefited many top managers in Chinese companies who have applied its principles to their management practices and policy-making (Van de Ven et al., 2018). The following Figure 1. illustrates the framework of HXMT with its key components.
Figure 1. The Theoretical Framework of HeXie Management Theory
- E: Environment / O: Organisation / L: Leadership / S: Strategy / HT: HeXie Theme
- HP: He Principle / XP: Xie Principle
- HX: HeXie Coupling / P: Performance
Adapted from Cao et al. (2011); Xi et al. (2010)
At its core, the theory comprises four key elements: HeXie theme (HT), He principle (HP), Xie principle (XP), and HeXie coupling (HX). HXMT first integrates the elements of environment, organisation, and leadership (E/O/L) to identify the tasks and challenges faced by the organisation, known as the HT. Here, the HT refers to the core problem or task that must be addressed within a specific period and context of a company’s development to achieve its vision and strategic theme (S). The organisation then selects the appropriate HP and XP based on the HT. The XP is a rational control mechanism designed to optimise operations and assumes that individuals will act rationally and follow established rules. On the other hand, the HP is an evolvement mechanism driven by the initiative and self-determination of organisational members. The interaction between HP and XP, centred around the HT, forms a HeXie mechanism and its corresponding operating state through HeXie coupling (HX). Within the HXMT framework, leadership is defined as the ability and influence to utilise various principles to drive organisational development.
HXMT serves as both a methodology and a toolkit system. It has the potential to bridge the gap between micro and macro levels of management, offering a systematic approach to tackle organisational management challenges in an increasingly complex and uncertain world (Zhang et al., 2018). HXMT views that Eastern and Western cultures and wisdom are characterised by complementary principles. Oriental philosophy is represented by the HP, while Occidental thought is embodied in the XP. The integration of these Eastern and Western philosophies is manifested through the HT and HX. This is carried out in accordance with the mechanisms described in Figure 1. above.
How to Apply HeXie Management Theory
Taken together, HXMT offers a holistic and systematic approach to management problem-solving throughout its application. To put HXMT into action effectively, here are some key questions to consider and a step-by-step guide:
- What is the most important task (HT)? This step identifies the top priority.
- How can we fulfil the task (HP & XP)? This step explores actionable methods and practices, such as implementing new systems or boosting employee motivation, to address the identified HT.
- How well are we performing (HX)? This step involves measuring the effectiveness of the chosen methods and practices.
- What remains unfinished (identifying a next HT)? This step identifies any gaps or areas for improvement, and then sets the next most important task.
Managers must ensure ongoing consistency and coherence among the four HXMT components for successful organisational implementation.
In Closing…
We envision HXMT, as a practice-based management theory, being widely adopted across industries to assist organisations in tackling their unique challenges and pursuing harmonious management practices. By doing so, HXMT will not only help entrepreneurs and managers to address emerging issues but also facilitate the continuous refinement and development of the theory itself. This will empower industry leaders to manage more effectively and put the theory into practice. Through this dynamic interplay between practical application and theoretical evolution, HXMT will remain a highly adaptable framework for navigating the ever-evolving challenges of modern management.
About the Authors
Dr. Chang H. Kim is an Assistant Professor of Sustainable Business at Xi’an Jiaotong-Liverpool University. His research focuses on circular economy business models and product-service system (servitization). He is a member of the Circular Economy Working Group for the coffee sector at the International Trade Centre in Geneva, Switzerland. Additionally, he serves as a subject matter expert on the circular economy agenda for the Korean Environmental Industry & Technology Institute.
Dr. Peng Liu is currently an Associate Professor and Head of HeXie Management Research Centre at Xi’an Jiaotong-Liverpool University. His research interests focus on HeXie Management Theory, strategic transformation and innovation ecosystem, governance innovation and succession of private (family) enterprises, healthcare ecosystem.
Dr. Lei Liang is currently a Professor of Management at Xi’an Jiaotong-Liverpool University and the Dean of XIPU Institute of Strategic Human Resources. His primary research interests include organizational theory and strategic human resource management.
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